The Lawletter Vol 40 No 8
In 2014, an Indiana appellate court considered the issue of whether a landlord can enforce a provision in a residential lease contract that seeks to protect it from liability for personal injuries caused by fungus or mold on the leased premises. In Hi-Tec Properties, LLC v. Murphy, 14 N.E.3d 767 (Ind. Ct. App.), transfer denied, 20 N.E.3d 851 (Ind. 2014), a tenant who leased an apartment that was below ground level brought suit against her landlord, alleging, inter alia, that mold in the apartment had aggravated her preexisting asthma and caused other injuries. The landlord defended against the tenant's claim by pointing to a clause in the parties' lease agreement that read in pertinent part as follows:
23. Mold. Lessee acknowledges that no evidence of mold was observed in the living unit prior to leasing. Lessee also agrees to notify Lessor in writing within ten (10) days of observing any mold. Lessor shall then have two (2) weeks within which to remediate the conditions at no cost to Lessee. As part of the consideration of this lease, Lessor shall have no personal liability for personal injury or property damage as a result of any mold, fungus, etc. . . . In any event, Lessee releases and agrees to save harmless, Lessor and their agents for personal injury and suffering, mental anguish, medical expenses, lost wages, etc., to themselves and or family members.
Id. at 771 (court's emphases omitted).
The trial court entered a verdict in favor of the tenant, finding the landlord to be 100% at fault and liable to the tenant for both compensatory and punitive damages. The court of appeals affirmed the lower court's decision and expressly ruled that the above-quoted exculpatory clause in the parties' lease was void because it was against public policy:
[T]he current clause immunizing Hi-Tec from liability for damages caused by mold is inconsistent with common-law principles of tort law, as it is well-settled that a landlord may be held liable for personal injuries caused by latent defects known to the landlord but unknown to the tenant and which the landlord fails to disclose. Erwin v. Roe, 928 N.E.2d 609, 616 (Ind. Ct. App. 2010). Such clauses offend the public policy of this state and will not be enforced.
We conclude that the exculpatory clause regarding mold in this residential lease is contrary to public policy insofar as it seeks to immunize Hi-Tec against damages caused by its own negligence. Therefore, the trial court did not err when it concluded that the exculpatory clause was void as against public policy.
Id. at 774 (footnote omitted).
In reaching its decision, the Hi-Tec Properties appellate court emphasized the public policy considerations that informed its decision:
A lease is no longer an isolated contract between one landlord and one tenant. The size of the rental industry is so great that construction of an exculpatory clause has an impact on thousands of citizens. Furthermore, the public has an interest in the quality of housing offered for rent to all members of the public. Enforcement of exculpatory clauses in personal injury cases results in great harm to the public, and thus these clauses do not fall within the exception to the rule that a party may not contract against his or her own negligence.
Id. at 773 (quoting Ransburg v. Richards, 770 N.E.2d 393, 402 (Ind. Ct. App.), transfer denied, 783 N.E.2d 700 (Ind. 2002)). The Hi-Tec Properties court also noted that "residential lease exculpatory clauses contravene long-established rules of tort liability and discourage residential landlords from meeting the duties of reasonable care imposed on them by law for the protection of society." Id. An excellent discussion of the Hi-Tec Properties case can be found at 35 No. 10 Quinlan, Landlord Tenant Law Bulletin NL 3 (Oct. 2014).
It is important for the reader to note that the Hi-Tec Properties case involved residential property and that the court placed great emphasis on the fact that there is a disparity in bargaining power between the parties to a lease of residential real property.